When filing for bankruptcy, debtors are faced with several important decisions. Some of the most important decisions made apply to what they are going to do with the property they own. Through bankruptcy debtors can choose to surrender property without any penalties and without facing any deficiencies; This even applies to property that has a remaining loan balance on it. Or, if they want to keep their property, debtors are also able to retain it; they can even keep property that has a remaining loan balance on it. Typically, debtors will decide they need to keep their cars or homes. If a debtor chooses to keep certain property with remaining loan balances, many times the lender that has the loan and holds the property as collateral will require the debtor to sign a reaffirmation agreement.
Reaffirmation agreements are a voluntary agreement between a debtor and a lender that must be filed within sixty days of the meeting of creditors, or before the bankruptcy case is closed. A reaffirmation agreement states that the debtor is agreeing to continue to make payments on the item they want to keep as they would have if they did not file for bankruptcy. In other words, the debtor will be making payments in accordance with the terms of the original agreement. If a debtor chooses to sign a reaffirmation agreement, he or she is completely responsible for the particular debt. However, once a debtor signs a reaffirmation agreement, they still have the option to withdraw the agreement, but they must do so within sixty days of when it was filed.
Deciding to sign a reaffirmation agreement is a very important decision and there are many factors that debtors should consider when doing so. If you desire to keep certain property that has sentimental and/or practical value, like a house or a car, a reaffirmation agreement will allow you to do so. However, debtors need to take into account whether or not they can actually afford to make payments on those properties. If a debtor signs a reaffirmation agreement and consequently cannot make payments, he or she can find his or her self back in financial trouble once again. A reaffirmation of a debt will essentially eliminate the fresh start aspect of Chapter 7 bankruptcies. Reaffirming a debt is not a requirement; however, sometimes it may be in your best interest. By reaffirming a debt, the payments you make towards your property will be reported to credit bureaus. This is a positive way to begin re-building your credit history post-filing. Conversely, however, if you reaffirm and are unable to keep up with payments post-filing, it could negatively effect your credit once again. If debtors are unsure if they can make the same payment post-filing, they should consider whether or not signing the reaffirmation agreement is the best option for them. Some debtors decide to reaffirm debts solely because they think that they will not be able to find another lender who will help them finance something like a car post filing; however, there are lenders that specialize in helping people who have filed for bankruptcy.
If you have questions about reaffirming your debt, contact a St.Louis Bankruptcy attorney today!